German CPI For September 2007

The German Federal Statistical Office have just reported that the German consumer price index rose 2.4% between September 2006 and September 2007. That was the highest year-on-year rate for two years (September 2005 was +2.5%). In July and August 2007, the year-on-year rate of change was at +1.9%. Compared with August 2007 the index was up 0.1%. Here is the chart:



The rather high year-on-year rate of change was due above all to the price development of mineral oil ­products. The prices of both motor fuels (+8.9%) and liquid fuel (+3.1%) rose in a year-on-year comparison, basically as a consequence of the marked price decrease observed for these products in September 2006. That basis-related statistical effect is the main reason for the price increase recorded in September. Not considering the price development of mineral oil products, the year-on-year rate of change would have been lower in September 2007, at 2.2%. Also, electricity prices (+7.4%) rose above average over the one year period, while prices of other energy products saw smaller increases than total consumer prices (including charges for central and remote heating: +2.2%, and gas: +1.4%).

Furthermore, higher prices of education (+27.0%), tobacco (+4.9%) and transport (+4.6%) had an impact on the rate of change.

Food prices increased in September 2007 by an average 2.7% compared with a year earlier. Among food, substantial price rises were recorded especially for oils and fats (+24.2%; including butter: +43.1%). Also, prices of dairy products and eggs (+6.8%; including curd cheese: +25.9%, and full-cream milk: +13.5%) and of bread and cereals (+3.3%; including rolls: +6.2%) were up against the previous year. Vegetables were markedly cheaper (–5.9%; including lettuce: –43.8%, and cucumbers: –33.2%).

The small price increase of 0.1% against August 2007 is due to opposite seasonal price developments. In addition to price decreases for fruit (–3.1%) and vegetables (–2.4%), there were the usual drops in the prices of accommodation services (–8.9%) and package holidays (–5.8%). In contrast, consumers had to pay an average 3.1% more for clothing and footwear than one month earlier as the summer collection was replaced by the autumn and winter collections.


The harmonised consumer price index for Germany, which is calculated for European purposes, rose 2.7% in September 2007 on September 2006. Compared with the previous month, the index was up 0.2%.




All in all, while there is nothing dramatic here, and many of these factors will work their way out of the pipeline in due course, this data will make it very difficult for the ECB to talk its way out of the corner it has boxed its way into and announce it is going to start reducing interest rates.